People's Bank dismisses privatization rumours

Responding to purported privatization claims, People's Bank today categorically denounced all such rumours citing them as being baseless and inconsistent with the proposed People's Bank Act amendments and in the overall context thereof: Commenting on the claims, Chairman of People's Bank Mr. Nissanaka Nanayakkara, PC stated that: "The objective of the People's Bank Act Amendment Bill, as issued on July 9, 2018 and as laid before Parliament, are primarily two-fold. One, to increase the authorized capital of the Bank as contemplat­ed through the proposed revision to section 12 - with any paid in capital increase thereon in the context of other applicable provisions in the Act, only possible if infused by the Government of Sri Lanka. Others, being proposed amendments to sections 20, 21 & 43, aims to enable the Bank issue Debentures for its regulatory purposes to simply facilitate further growth; which is no different to other State Owned Banks.

He continued: "In this context, it remains imperative to point out that ultimate Government of Sri Lanka sole ownership in the Bank remains enshrined in section 13 of the People's Bank Act No 29 of 1961.

For the avoidance of any doubt, this section 13 is not amongst the proposed amend­ments. Needless to say, unless and until so amended, any rumours.

relating to a purported share issuance to any party who is not ultimately the Government of Sri Lanka - be now or in future - will remain baseless. In other words, it must be asserted that, there will be no share issuance to depositors or employees of the Bank nor will there be any share conversion options in the event Debentures are issued"

Speaking on the Bank's performance, Chief Executive Officer/ General Manager of People's Bank Mr. Rasitha Gunawardana stated that: "Stemming primarily from macro stresses, increases in non­performing loans and pressure on earnings stemming there from are well evident throughout the industry. Similar to its Peers, People's Bank's gross non­performing loan ratio rose to 2.9% at March 31, 2019 from 2.49% at end 2018 and 1.87% at end 2017. That said, these were below industry averages which were 4.23% at March 31, 2019, 3.42% at end 2018 and 2.5% at end 2017" Commenting on the Bank's dividend payouts and the earning retained over the last two years in particular, Mr. Gunawardana pointed out that: "During the years 2017 & 2018, the Bank paid a total LKR 5.22 billion and LKR 3.42 billion, respectively, to the Consolidate Fund of General Treasury as dividends. This translates to a payout, as expressed as a function of Post Tax Profit, of 28.6% and 20.0%, respectively. As evident thereby, there has been considerable improvement in the earnings retained by the Bank and, contrary to claims made, 100% of its profits are not taken by General Treasury as dividends'.

By way of background, People's Bank is the country's second largest financial services provider; as measured by total assets, deposits and customer advances. The Bank benefits from a country wide network presence with 737 branches/ service centers island wide. During the year ending December 31, 2018 -the Bank on a consolidated basis reported total operating income and pre-tax profit of LKR 94.54 billion and LKR 31.16 billion, respectively. During 2018, its consolidated net loan book expanded by 23.8% whilst it's consolidated deposit base grew by 14.5% YoY.

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